Formal Labor Market Dynamics and Development

Anne Brockmeyer, François Gerard, Gabriel Ulyssea, Linda Wu, Marcelo Bergolo, Rodrigo González, Benard Kirui, Andrea Lopez-Luzuriaga, Leonardo Morales (), Andrea Otero-Cortés, Nadine Riedel, Matías Tapia, Tanisa Tawichsri and Verena Wiedemann

No 26154, RFBerlin Discussion Paper Series from ROCKWOOL Foundation Berlin (RFBerlin)

Abstract: This paper studies formal employment dynamics using linked employer-employee data from eight countries spanning a wide income range from Kenya to Chile. First, we show that formality rates increase with development, both between and within countries, because more workers enter the formal sector, not because they spend more time in formal jobs. Second, formal labor market fluidity increases with development, as workers hold more formal jobs, spend less time in each job, and less time between jobs. Third, greater fluidity is associated with higher life-cycle wage growth, which is largely accounted for by within- rather than between-firm wage gains.

Keywords: Formal Employment; Economic Development; Life-Cycle Wage Growth (search for similar items in EconPapers)
JEL-codes: J46 J63 O17 (search for similar items in EconPapers)
Date: 2026-06
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